Analysts: Augmented reality will give iPhone X the ‘wow factor’

The augmented reality (AR) technology in Apple’s new iPhone – due to be unveiled as the iPhone X in California on Tuesday – will provide Apple with a fresh revenue boost, according to analysts at Macquarie Research.

In a note to investors on Monday, Macquarie Research analysts Benjamin Schachter and Ed Alter said they expect Apple’s latest innovations in AR to increase revenues across Apple’s Services business, which includes the App Store, iTunes, Apple Music, iCloud, Apple Pay, and more. Revenue across Apple’s Services business was $7.3 billion (£5.5 billion) for the last quarter.

“Services line to benefit from AR and other new innovation,” the analysts wrote, pointing to the fact that Apple has already generated hundred of millions from the wildly-popular “Pokémon GO” AR app.

When Apple releases iOS 11, the operating system will become the largest AR platform in the world overnight. Programmers have already started building AR apps for iOS 11.

Updated iPhone X hardware – combined with software updates set to be rolled out with the iOS 11 operating system at the end of the month – will likely allow consumers to hold their phone up to something or somewhere in the real world and get feedback through the iPhone screen in ways that they haven’t experienced before.

AR will provide the ‘wow factor’

The analysts also think that Apple’s marketing teams will focus on the AR abilities of the new iPhone. “Unlike VR, AR’s ‘wow factor’ can be communicated easily via video advertising” they wrote.

“Tim Cook’s excitement for AR is palpable and we expect AAPL to highlight AR in its iPhone launch presentation and future marketing efforts. Services remains somewhat underappreciated among investors (though not nearly as much as when we first started discussing the theme) and we continue to see that as driving upside.”

Other companies like Facebook and Snapchat are also building augmented reality technology into their platforms but the analysts predict AR-related announcements from the other major technology companies over the next 18 months.

“We expect significant capital to be deployed in attempts to establish leadership positions for the coming AR platforms,” they added.